How Long Do FINRA Investigations Take?
FINRA Investigations Typically Last a Year or Two
A look at the Annual Reports for the FINRA Office of Hearing Officers shows that FINRA investigations can last anywhere from a couple of months to several years. However, most seem to be completed in about 12 to 24 months.
This is not counting the time needed to litigate the case. The hearing process is quite separate from the preliminary investigation, which is where most defendants spend the majority of their time. FINRA investigations are resolved far more often through a Wells Notice and a Wells Submission, which can lead to settlement negotiations between FINRA and the defendant. While these negotiations can extend the investigative process, they can also put an end to it.
What Can Make a FINRA Investigation Take Longer
Most FINRA investigations seem to take around a year or two to complete. However, investigations that are especially complex or intricate can take longer.
Some additional facts or circumstances that can prolong a FINRA investigation include:
A Cooperative Defendant
If the defendant is cooperative, the investigation can go much more quickly.
However, cooperation is not always the best option. In many cases, cooperating with FINRA’s investigators will only give them the information that they need to build a strong case against you. This can lead to a more efficient investigation, but it can also make you more likely to be found liable.
A Combative Defendant
Defendants who are not cooperative with the investigation can slow down the process considerably. They often force FINRA to use its enforcement powers to get the information that it needs for the investigation to proceed.
However, as with cooperative defendants, being combative is not always the best option. When FINRA conducts an investigation, it is not a criminal investigation, so you do not have the right to remain silent. There is no Fifth Amendment right to go silent in a civil investigation. Refusing to cooperate can lead to serious repercussions, including additional sanctions and a charge of “failure to cooperate.”
There are still lots of ways to refuse to say things that incriminate you without necessarily refusing to cooperate, though. Many people who have FINRA coming after them for securities fraud or some other form of corporate misconduct have to walk a very difficult tightrope of trying to cooperate with FINRA’s investigation sufficiently that they do not get sanctioned while also keeping the agency from getting damaging information.
It is extremely important to have a FINRA defense lawyer from Spodek Law Group to guide you through this process.
Multiple Defendants or Parties Involved
If there are multiple defendants in the case, or if third parties have to be contacted and compelled to provide information relevant to the investigation, the process will likely take much longer.
A Lack of Evidence
If FINRA can find very little information to support the allegations against you, the investigation will likely take much longer. Investigators will have to spend more time searching for evidence to substantiate the accusations.
Lots of Evidence
If FINRA finds lots of information that supports the allegations, it can also make the process take a long time. All of the evidence that investigators find that supports the allegations must be carefully weighed and analyzed for accuracy and to measure its importance.
The Complexity of the Allegations
Some allegations are more complex than others. For example, an accusation of insider trading is relatively straightforward, and the investigation into it will likely be resolved more quickly. However, allegations of market manipulation can take years of investigation and lots of highly technical analysis to understand and appreciate the nuances of the case. Those investigations will take much longer to complete.
The Setting or Environment
If the alleged misconduct is in a setting or environment that is more complex, this can create significant obstacles to a successful investigation, as well as to a successful defense. This can make the investigation into the misconduct take a long time to complete.
Frequently Asked Questions About How Long a FINRA Investigation Lasts
Why Does FINRA Investigate Misconduct at Brokerage Firms?
FINRA investigates allegations of misconduct at brokerage firms because it has to. Under the Securities Exchange Act of 1934, Congress created self-regulatory organizations (SROs) that oversee the stock exchanges. FINRA is an SRO.
SROs are required by federal law to regulate the trading of securities, and must do so in a way that is consistent with the provisions of the Securities Exchange Act. Their goal is to promote fair trading of securities, and to prevent fraud and other misbehavior.
To that end, FINRA creates rules that apply to the stock exchanges that it oversees. It then monitors them for compliance with those rules, and investigates allegations of wrongdoing.
What is FINRA Looking For in an Investigation?
FINRA investigations are searching for evidence to substantiate allegations of wrongdoing at a brokerage firm, or by a broker that is registered with the agency. The potential wrongdoing can be violations of FINRA rules or of federal securities law.
Examples of violations that can lead to FINRA investigations include:
- Excessive trading
- Churning accounts
- Unsuitable investments
- Selling away
- Failure to supervise
- Forgery or misrepresentation
Does the FINRA Investigation Take Less Time if I Have Legal Representation?
It may not seem like a FINRA investigation would take less time if you have a FINRA defense lawyer representing you through it. However, this is not necessarily the case.
There are two reasons for this.
First, FINRA takes a very hard line on defendants that refuse to cooperate with their investigations. By retaining a defense lawyer, you are showing that you are intent on cooperating with the proceedings. This can reduce the amount of time that the agency spends on the investigation.
Second, there are several deadlines that FINRA uses to keep the investigation moving forward. However, those deadlines can be extended. While FINRA is generally receptive to requests to extend the deadlines that it imposes on defendants, the agency is far more likely to grant these requests if they are made by a defense lawyer. This can help you, as the defendant, by giving you more time to prepare your defense through the investigative process. While it can prolong the time that the investigation takes, it can also drastically reduce the odds that you face civil liability or criminal charges.
What Can a FINRA Defense Lawyer Do for Me?
A FINRA defense lawyer can guide you through the investigative process, helping you present your case in the best way possible. This can include:
- Interacting with FINRA investigators on your behalf
- Helping you comply with information requests from FINRA
- Informing you of your rights during the investigation
- Preparing a Wells Submission
- Negotiating a settlement with FINRA
However, not all FINRA defense lawyers have the same background. Some of them have more experience than others, and some have different places in that experience. For example, many of the FINRA defense lawyers at Spodek Law Group spent years as securities lawyers at the Securities and Exchange Commission (SEC) or the Department of Justice (DOJ) before coming to our firm. This gives them a unique insider’s perspective on how government agencies like FINRA build their case and what they are looking for.
Spodek Law Group: FINRA Defense Lawyers
If you or your brokerage firm is facing a FINRA investigation, you need to prepare yourself for a potentially long process. Getting the best outcome possible is far more important than getting through it quickly.
The FINRA defense lawyers at the national law firm Spodek Law Group can help.
Contact our legal team today for a confidential consultation: 212-300-5196
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